The film is set in and around China's Valley of Peace where there are no humans, only talking animals. In the tradition of lovable but challenged cartoon heroes, along comes Po (Jack Black), the well-meaning if awkward Panda bear who happens to be the world's biggest fan of kung fu. It isn't exactly a talent needed for his place of employment, the family noodle shop. Po spends his days dreaming about martial arts while serving noodle soup.

At a nearby temple, Head Monk, Master Oogway (Randall Duk Kim), has had a vision that power-mad Tia Lung (Ian McShane) will escape from prison and ravage the Valley in his quest for dominance. To prevent this, Oogway must find the "Dragon Warrior." There are five obvious candidates - the Furious Five, all apprentices to Master Shifu (Dustin Hoffman) - Monkey (Jackie Chan), Tigress (Angelina Jolie), Viper (Lucy Liu), Crane (David Cross), and Mantis (Seth Rogen). Yet, as the result of a seemingly random series of events, Oogway chooses Po. This comes as a surprise not only to an outraged Shifu but to his pupils as well.

When unexpectedly chosen to fulfill an ancient prophecy, Po's dreams become reality. The very thought of Po confronting Tia Lung is laughable since the fat panda even has trouble making it to the top of the temple's stairs. But Po has hidden talents that Shifu is able to discover and unlock, even as time grows short.

Can Po turn his dreams of becoming a kung fu master into reality? Po puts his heart into the task, and the unlikely hero ultimately finds that his greatest weaknesses turn out to be his greatest strengths.